Tuesday, October 16, 2007

It won’t be long before employers are singing this song, if demographers are correct in their predictions. Researchers tell us that the Baby Boomers, born between 1946 and 1964 and numbering some 79.9 million souls (Mature Market Institute, 2000), will soon begin retiring. So what’s the problem with that? The problem is, there aren’t enough people in the generation called Gen-X to fill those newly open positions. In fact, according to Law Practice Today, there are only 51 million people around who were born between 1965 and 1976. What does this mean? Very simply, we can expect a serious labor shortage to settle over the land soon, and last 10 to 15 years.

While managers alternate between hoping the doomsayers are wrong and doing everything they can to attract and keep talented workers, they will find that there are not enough warm bodies to go around. Some firms will probably thrive in this worker-poor market, but many will feel the pinch. There are two possible circumstances that this scenario might bring about that I will posit here.

First, the law of supply and demand may cause firms to pay a significant premium in salaries, which may bring about inflation. Second, firms may begin to push hard for the development of some very serious automation. Serious as in general artificial intelligence. Artificial intelligence today is comprised of applications that can perform a narrow range of tasks very well; far better than humans, in fact. But that narrowness places some significant boundaries in the way of solving the labor shortage problem. General artificial intelligence would solve it in two ways: Such intelligences could be deployed and trained to perform any task a human could perform, only a lot better. Second, they would quickly improve themselves to the extent that they would be smart enough to find other solutions to the problem.

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I think that you're vastly underestimating the impact that AGI will have on the world, but it's kind of hard for me to put the problem into words; I'll try anyway.

It's not that an AGI couldn't work as a management consultant for Deloitte, it's just that putting an AGI to work on "effective management strategies" may well be a bit like putting Einstein to work picking bananas.

Rather than a scenario where AGIs replace the existing workforce in a one-for-one manner, I think it is more likely that an AGI will come along and replace the entire world economy, or at the very least replace a whole company.

Think about it: What do people who work for PriceWaterhouseCooper, BP or BAE systems actually do? They process information with the speed and power of a human mind. What does an AGI do? It processes information a million or a billion times better and faster. You could replace an entire company with it.

In the near term I think there will also be increased demand for tele-operated or semi-autonomous machinery. This means for example that a farmer doesn't necessarily need to be sitting in his tractor to drive it, and could instead be simultaneously supervising multiple vehicles through a web based interface. This kind of automation does not require any big breakthroughs in AGI - only adequate telecommunications infrastructure (such as wireless networking).

There will also be a need for increased automation to help those baby boomers remain independent for longer so as not to put a huge strain upon hostpitals or care homes. I think we're going to see the emergence of large scale supermarket-style care homes which combine some amount of automation with economies of scale. From the perspective of the person being cared for this might be quite an unpleasant experience, but from a purely economic point of view I can see it being justified.

assumes AGI is developed and widespread in the next 15 years. possible, but certainly not guaranteed.

3rd option is an even bigger increase in outsourcing, especially since the education advantage the US currently has won't last, as well as improved communications technologies allow for this to become more cost-effective.

4th option, not all baby boomers will retire at the same rate as historic measures. Income/lifestyles may require more years of work to build suitable nestegg, and better health for the aging could enable it. Higher demand for labor would also increase wages, drawing more potential-retirees to stay in the workforce longer.

To get an idea of what may happen, have a look at the Japanese economy in recent history, they have gone through a similar shrinkage in working population and growth in retired population. Basically their economy went into recession.

At the moment I just don't see AGI happening in the near term, have you seen any system which looks like it may develop into this?